Biopure Corporation: A Quantitative way for deciding the pricing and the distribution strategy for Oxyglobin
Note: such quantitative analysis is not required for your mid term exam. However, this note will be of interest to any student who is interested in knowing how to employ a rigorous way of computing the price and the subsequent distribution strategy.
Step 1: Calculating the total potential demand for Oxyglobin:
Critical cases: We can calculate the total potential demand for dogs for the critical cases in terms of units of blood as follows:
It's given that the total no. of vet practices are 15,000. Out of these 5% (or 750) are emergency care practices and rest 14,250 are primary care practices. It is also given that a primary care practice on an average uses 17 units of donated blood and the emergency care practice uses 150 units per year. Therefore, the total demand for emergency care practices for the critical cases would be 150*750 units and that for primary care practices for the critical cases would be 17*14250 units. The total demand for critical cases would be 354750 units of blood.
Semi/Non Critical cases: Given the total units of blood for the critical cases, we can calculate the total units of blood for the semi critical cases. It's given that the critical cases were 2.5% of the total cases and semi critical were 27.5%. Therefore the total demand for semi critical cases would be 354,750*27.5/2.5 =3,902,250 units.
Step 2: Estimating the demand curve
Refer to tables A and B of the case. Note it's given that the vets use a doubling rule, that is, they charge a price to the customers that is twice the price they pay to the company. Next, it is important to note what the decision tree would be for the consumers. Fi ...